We are always asked this question by small business owners when they need us to generate the SARS Tax Compliance Pins. And the answer is simply YES. I would like try to simplify the reason why that is the case.
The most basic requirement of compliance is that you must submit the Tax Annual returns. What is SARS Annual returns?
•The company tax return is a legally binding declaration to identify all income received or accrued and all income taxable in the hands of the company. The ITR14 (SARS form uploaded on the e-Filing profile) must be completed and submitted within 12 months after the financial year end.
• What exactly do we submit to SARS? We submit the Annual Financial Statements. How do we prepare the AFS? Though i will not be able to explain in details how to prepare the AFS on this blog I however would like to emphasize the information required to prepare the annual reports.
• A business is a transaction. Business is the practice of making one’s living or making money by producing or buying and selling products (such as goods and services).
• Thus we need to capture all these daily transactions as they occur.
The process of capturing the transactions is called Bookkeeping.
Hence, data capturing is extremely important in our businesses. Because without the information we will not be able to prepare the annual reports.
• The process sequence like this: Bookkeeping, Report Preparations then Tax. See how all these connect to one another? You will realise that we need source documents to capture transactions. Documents such as Invoices, Bank statements, some businesses have software or applications they use or even spreadsheets. The documents are given to a tax preparer or an accountant so that they can put together the annual reports.
• What are Annual Financial Statements? They are formal records of the financial activities and position of a business or person at financial year-end.
• An annual financial statement contains a list of the company’s assets and liabilities. That section is called the balance sheet. Assets can be anything ranging from cash and cash equivalents to property and intellectual properties, such as patents. Liabilities can for example be equity, the company’s debt or accounts receivable. Thereby, a balance sheet provides a snapshot of a company’s value.
• The income statement is a different part. Therein, a company’s annual income and expenses are listed in order to determine, whether a company has produced a profit or a deficit. Invoices are also taken into account here.
• Balance Sheet – informs the person reading it the Financial position of the business. Whereas the Income Statement informs about the business performance of the business. The final outcome of the income statement is the net profit, which is used to base the tax to pay. Thus referred taxable income.
• Once you register a company you need to understand that you are expected to file the tax returns every financial year end. That is the utmost obligation from your end. This is irrespective of whether the business is operating or not. If the business is doormat – you declare nil returns. Failure to do so will render your company non-compliant. And this will affect your Tax Compliance Status.
Compiled by Ms. Dikeledi Seoloane – Accountant, Tax Practitioner and Owner at Matsobanemetja Business Consulting – The Accounting Firm
http://www.matsobanemetja.co.za
Matsobanemetja Business Consulting Pty Ltd 